A look at mutual funds and their 13Fs

CBS.MarketWatch.com

SAN FRANCISCO (CBS.MW) -- Top 10 lists are a great reality check for investors, especially when they come from large investment houses like Merrill Lynch.

The Merrill Lynch list of top technology recommendations this week pumped up investors who were looking for confirmation about their investment beliefs. Nasdaq stocks as a group soared, and Cisco, Intel and Oracle investors everywhere said, "Phew! Wall Street still believes in the things I believe in."

An even better reality check for investors comes from mutual funds, which buy large amounts of this country's securities. Funds are required to report their holdings each quarter -- in writing to the Securities and Exchange Commission in Washington. In some cases, written reports from a fund's managers to fund holders, usually in a mailing, can shed light on a particular company.

"When we cover this stuff, like 5 percent positions by institutional investors -- like a mutual fund, we know they have access to the best Wall Street research, their own analysts," said Michael A. Willner, president of www.newstraders.com. "They are plunking their own money down and buying the stock."

That is the beauty of the so-called "buy-side." When fund managers reveal all, as they are required to by law in the United States, investors are getting a look at the beliefs and buying/selling patterns of the people who are supposed to be America's smartest professional investors.

Willner's team of researchers in Virginia reports each day on large positions from funds and other institutions. Willner founded and then sold a news agency called Federal Filings to Dow Jones and Co.

"Let's say (fund manager) Mario Gabelli files that he has a stake in an auto parts company," said Willner. "Well, Gabelli was an auto parts analyst at one time. That's significant."

Funds that manage $100 million or more must file a Form 13F each quarter with the U.S. Securities and Exchange Commission. Often, investors see funds' top holdings when they read the literature that fund managers send to their fund holders. Or check the fund managers' Web sites.

Information Age Fund

The information, alas, can get to investors almost two months after the fact. Fund managers' Form 13Fs, according to the regulations, are filed with the SEC "within 45 days after the last day of (a) calendar year and within 45 days after the last day of each of the first three calendar quarters of the subsequent calendar year."

Still, the listed holdings can be invaluable -- especially if investors stick to the rare fund managers who consistently post excellent returns. After all, only a handful of fund managers surpass the returns of their chosen benchmark indexes -- the bar they must hurdle each quarter if they are to keep investors satisfied.

Take Ron Elijah at RS Funds in San Francisco. Elijah, who worked in Elaine Garzarelli's shop years ago as a stocks strategist, is getting publicity these days as one of Wall Street's best fund managers. The Information Age Fund that he and co-manager Rod Berry manage has gained 46 percent since the start of the year.

Elijah has been part of RS Funds predecessor Robertson Stephens and Co. for a decade or more and is a specialist in semiconductors and technology. The Information Age Fund
"
has gained about 30 percent a year, on average, since it kicked off in 1995. I first met Elijah in the late 1980s, when he forecast the boom in semiconductor stocks and other technology makers.

"That's valuable information," says Willner at NewsTraders.com. "Even dated as it is, the list tells you what a professional is thinking about their area of expertise."

In this case, technology. Elijah's notes to fund holders are just as valuable. In them, he and his co-manager give Internet investors an idea of what to expect for the holidays.

Value-Plus Growth Fund

"Many of the companies we invest in should benefit as traditional retailers scramble to build a Web presence for the upcoming holiday selling season," he says.

Another of Elijah's funds, the older Value-Plus Growth Fund
rsvpx
looks at companies that might benefit from the aging of the U.S. baby boomer generation. Give this fund manager credit. Elijah has stuck with this theme at least since 1992, and probably earlier than that. The Value-Plus Growth Fund is up about 25 percent a year since its 1992 launch.

"The first baby boomer just turned 50 in 1996, with 80 million more to follow in the next 15 years," he says in his notes. Elijah says he is bullish on health care.

The Value-Plus Growth Fund's $700 million or so of holdings include electronics retailer Best Buy
BBY, +0.87%
whose stock was hit hard this month after indications of slower profit growth. Drug retailer CVS Corp.
CVS, +0.34%
is another top holding.

Willner at NewsTraders says fund managers aren't always right. Still, Willner says he feels comfortable following the investment ideas of the people who are buying the companies they are plugging.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information.
All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only.
Intraday data delayed at least 15 minutes or per exchange requirements.